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Solana’s native token SOL (<a href="https://cointelegraph.com/solana-price-index">SOL</a>) experienced a significant 21% decline over the past week, reaching its lowest point in nearly six weeks. This downturn triggered a substantial $113 million in liquidations of leveraged long SOL futures contracts since April 11, suggesting that investors may have been overly optimistic following SOL's 61% price surge in March. 
This raises questions about the potential for further corrections and whether the $130 support level will hold firm.
<h2 id="solana-ecosystem-growth-and-coinbase-integration">Solana ecosystem growth and Coinbase integration</h2>
Market analysts observe that Solana’s current market capitalization of $60 billion appears inflated, particularly when compared to Avalanche’s (<a href="https://cointelegraph.com/avalanche-price-index">AVAX</a>) $13 billion and Tron’s (<a href="https://cointelegraph.com/tron-price-index">TRX</a>) $10 billion, standing four and six times higher, respectively. However, some argue that the premium is justified by the rapid expansion of Solana’s ecosystem, with many projects launching their own tokens.
On April 16, Coinbase <a href="https://twitter.com/CoinbaseWallet/status/1780297256370946124" target="_blank" rel="noopener nofollow">announced</a> that its wallet is now fully integrated with the Solana decentralized exchange (DEX) ecosystem, supporting over 50,000 Solana SPL tokens. This integration simplifies the trading process for users by allowing them to directly input the contract address into the “swap flow,” thereby lowering barriers to entry into Solana’s ecosystem.
Between April 12 and April 17, the open interest in SOL futures decreased by 40% to $1.5 billion, reflecting a reduced demand for leverage. Analyzing the SOL futures funding rate can shed light on whether this decline was primarily due to a diminished interest in long positions.
The funding rate for SOL perpetual futures often serves as a gauge of market sentiment. A positive rate suggests a higher demand for leveraged long positions, whereas a negative rate indicates a preference for shorts, betting on a price decrease.
<figure>
 <img src="https://s3.cointelegraph.com/uploads/2024-04/516eb880-c0d1-4c0b-abb9-66d4b05536ea.png">
 <figcaption style="text-align: center;">
 SOL perpetual futures 8-hour funding rate. Source: Coinglass
 </figcaption>
</figure>
The funding rate for SOL futures has been negligible since April 12, suggesting a balanced interest between long and short positions. This data is somewhat reassuring given that SOL’s price has dropped 33% in the last 16 days, with it poised to close below $136 for the first time since March 6.
<h2 id="recent-network-congestion-did-not-halt-solana-dapps-activity">Recent network congestion did not halt Solana DApps activity </h2>
The Solana network recently encountered severe congestion issues, with a <a href="https://cointelegraph.com/news/solana-mainnet-beta-update-resolve-congestion-issues">failure rate</a> of up to 75% for transactions, as reported by Cointelegraph. In response, developers rolled out an upgrade aimed at alleviating these bottlenecks. This issue has caused several projects to <a href="https://cointelegraph.com/news/solana-open-interest-price-decline-alt-coins">postpone their token</a> launches until these network challenges are fully resolved.
Adding to the pressure on SOL’s performance were setbacks in several notable projects, such as MarginFi. On April 10, Edgar Pavlovsky, CEO of MarginFi, resigned, which led to $190 million in withdrawals. The controversy deepened as other Solana-based <a href="https://cointelegraph.com/news/marginfi-withdrawals-skyrocket-ceo-rage-quite-controversy-mrgn-token">projects accused</a> MarginFi of failing to release credits to users. This situation underscores the volatility and challenges within the Solana ecosystem.
Despite any underlying factors, the downturn in Solana SPL tokens was pronounced across the board. In the decentralized finance (DeFi) sector, Jito (JTO) plummeted by 29% since April 12, while Raydium (RAY) and Jupiter (JUP) registered declines of 24% and 27%, respectively. Additionally, prominent Solana memecoins, including Dogwifhat (WIF), suffered a steep 32% drop over a six-day period.
Analysts consider Solana’s DApp activity as indicative of SOL’s price movements since the usage of decentralized applications inherently boosts demand for SOL. This demand arises both from network usage fees and participation in SPL token airdrops.
Related: <a href="https://cointelegraph.com/news/memecoins-making-millionaires-good-for-crypto">Memecoins are making millionaires, but are they actually good for crypto?</a>
<figure>
 <img src="https://s3.cointelegraph.com/uploads/2024-04/06f7b604-fd92-48c6-ad99-08a93a17dfd2.png">
 <figcaption style="text-align: center;">
 Top blockchains ranked by 7-day DApps volumes. Source: DappRadar
 </figcaption>
</figure>
Recent data from DappRadar shows a significant uptick in Solana’s DApp volumes, which soared by 60% to $1.3 billion over the past week, outstripping its competitors. During the same period, Ethereum saw a 20% increase in activity, while BNB Chain experienced a 13% rise. Despite these gains, Solana’s active user count remained stable at around 2 million, even as the Ethereum network witnessed a 4% drop in active addresses.
Given the stable demand for leverage in futures markets coupled with robust on-chain activity, there is little to suggest that SOL will lag behind the broader altcoin market. However, continued network congestion could challenge the sustainability of Solana's premium valuation compared to other blockchain tokens.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Solana price takes another tumble — Can SOL hold above $130?

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